Owner Age Impact on Mergers and Acquisitions

Owner age can play a large role in the inevitable psychology surrounding M&A. I have seen first hand how some business owners simply cannot let go of their baby. The older a business owner gets, the more difficult it can be fully letting go. In some cases, the worst clients are septuagenarians who–for a number of reasons–simply cannot let go. Blanket statements are always proven false by the exceptions that inevitably become the rule. However, it is safe to say that age can have a huge impact on the timing, headache, cost and overall success of successful sell-side mergers and acquisitions. Here we will discuss how various age brackets impact M&A.

The younger, sub-50 year-old entrepreneur typically has a different mindset when it comes to building a business and successfully exiting. For many within the “millennial” generation, job security simply does not exist. In fact, many entrepreneurs in this age bracket have referenced the broad, negative effects of the recession and its collateral damage as reasons to seek an entrepreneurial path in the first place.

Owner operators in their 20’s and 30’s often see their companies as a resource that will give them even more stability than a traditional job. In today’s market, we are also seeing many more repeat entrepreneurs in these age brackets. That is, those owners who start, grow and exit successful companies more than once in their lifetime. Instead of a single liquidity event, we expect more entrepreneurs to build, scale and exit their businesses more than once throughout their careers.

Those in their late 40’s through their mid-60’s often own and operate businesses that have existed for much longer periods. Those with more long-standing businesses may see themselves as part of a much larger ecosystem where they play a key role in the success of a community–a community that needs and involves them. Such companies are flanked by loyal owners as their companies have provided ample profits, allowing them to live upper middle-class lifestyle for many years.

In such situations, owners often feel a sellout of the business includes a sellout of the family of suppliers, buyers and employees that helped make their business a success. And, in many cases, such owners may see the business as their access to a more solid retirement, but if they have had profits for many years and planned appropriately, soft metrics like taking care of and maintaining loyal employees may be paramount to receiving the absolute highest price for the company.

For those business owners that reach the age of 65 without selling their company, they typically treat the company as their means to maintaining purpose or even keeping up their hobby. It is true that many a true, hard-driving entrepreneur loves and finds fulfillment in the work itself. The business is a means to an end for many. While older entrepreneurs can sometimes be a hindrance for the next phase of meaningful growth, often the founding entrepreneurs know exactly what the business needs to avoid cannibalizing the existing operations.

While transitioning out the business can be difficult for some, others can find doing so provides them the financial and time freedom they have been looking for after years of hard-driving in the proverbial “salt mines” of entrepreneurship. When it comes to age stereotypes in entrepreneurship , exceptions to the rules abound. Finding the right time to sell a business is as important of a decision as diving into business ownership in the first place.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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